Ford Motor Deserves More Respect From Investors, Bank of America Says

By Keith Naughton -
Aug 9, 2011

Ford Motor Co. (F), which fell below $10
yesterday for the first time in 13 months, is not receiving the
credit it deserves from investors, Bank of America Corp. said.

Ford shares, which dropped 41 percent this year through
yesterday, are trading at 2.6 times earnings before interest,
taxes, depreciation and amortization, compared with a historical
average of 4 to 5 times earnings, Bank of America analyst John Murphy wrote in a note today. Murphy added Ford to the company’s
US 1 list of stocks with a buy recommendation.

“Even in the downside scenario of a double-dip recession,
Ford’s stalwart balance sheet is substantially healthier than in
2008,” Murphy wrote. “But we believe that the market is not
giving Ford’s stock credit for the company’s balance-sheet
health.”

Ford had net income of $4.95 billion in the first half of
the year, as fuel-efficient models like the Fiesta subcompact
attracted buyers in a slowing U.S. auto market. Ford paid down
debt by $2.6 billion in the second quarter, leaving it with $22
billion in automotive gross cash and $14 billion in debt.

“The recovery in U.S. demand should drive the auto stocks
higher while Ford’s product cycle hits a sweet spot driving
market-share gains, with a ‘fortress-like’ balance sheet,”
wrote Murphy, who has a price objective on Ford stock of $26.
“It should also be noted that second-quarter results were
solid.”

Ford Rises

Ford, based in Dearborn, Michigan, rose 98 cents, or 9.9
percent, to $10.91 at 4:01 p.m. in New York Stock Exchange
composite trading. The shares closed yesterday at $9.93, the
lowest since June 29, 2010.

“The near-term economic challenges are clear, and we see
the U.S. debt ceiling law and European Central Bank bond
purchase as constructive developments to stabilize the global
economy,” John Stoll, a Ford spokesman, said in a statement.
“We remain focused on the incoming indicators and economic
fundamentals, and we are monitoring how they will affect
consumer confidence.”

Ford maintained its 2011 forecast of 13 million to 13.5
million industrywide sales of vehicles, including medium- and
heavy-duty trucks. “It likely will come in at the lower end,”
Stoll said.